2014-0539641E5 Employment Income Earned by a Nisga’a citizen

Principal Issues: Whether the employment income earned by a Nisga’a citizen after section 87 of the Indian Act ceases to apply to Nisga’a citizens, pursuant to an agreement with the province of British Columbia and the Government of Canada, is exempt from tax where the duties of employment are performed on another First Nation land.

Position: No.

Reasons: According to paragraph 6 of the Taxation Chapter of the Nisga’a Final Agreement, as of January 1, 2013, section 87 of the Indian Act does not apply to Nisga’a citizens to provide an exemption from tax.

Author: Mahendran, Anandavally
Section: 81(1)(a) of the Income Tax Act, 87(1)(b) of the Indian Act

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                                                                                                                                            2014-053964                                                                                                                                                                                                                Ananthy Mahendran
                                                                                                                                             (905) 721-5204

September 10, 2014                                                           

Dear XXXXXXXXXX:

Re: Employment Income Earned by a Nisga’a Citizen

This is in response to your email of July 9, 2014, asking for clarification as to whether the employment income earned by a Nisga’a citizen is exempt from income tax where the duties of employment are performed on another First Nation’s reserve.

This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

Section 87 of the Indian Act together with paragraph 81(1)(a) of the Income Tax Act may provide an Indian with an exemption from taxation on employment income received by the Indian if the employment income is situated on a reserve. The Nisga’a Nation has negotiated an agreement with the Government of British Columbia and the Government of Canada that is referred to as the Nisga’a Treaty. This treaty specifies that section 87 of the Indian Act will have no application to Nisga’a citizens with respect to income taxes as of the first day of the first calendar year that starts on or after the twelfth anniversary of the “effective date”. The effective date, as specified in section 27 of the Nisga’a Final Agreement Act, is May 11, 2000.

Accordingly, as of January 1, 2013, section 87 of the Indian Act does not apply to income received by Nisga’a citizens and therefore, their income is not exempt from income tax, even if they are Indians and their employment duties are performed on another reserve for another First Nation. In other words, any employment income received by a Nisga’a citizen on or after January 1, 2013 must be included in income and will be subject to tax, unless another provision of the Income Tax Act or another statute of Canada exempts the income from taxation.

We trust that these comments will be of assistance.

Yours truly,

Roger Filion, CPA, CA
Manager
Non-Profit Organizations and Aboriginal Issues
Financial Industries Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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